Decoupling going on. Since the beginning of the year in Europe we have assisted to a decoupling between Govies vs Credit, with the latter showing little response to the overall increase in political risk perception. (Continue...)

Credit market in 2017. In general, the market seems complacent about what could happen in 2017. Credit outperformance, especially in the HY space, could continue in the short term, supported by high cash levels and limited net supply. (Continue...)

Meanwhile the ECB… Despite positive development in growth and headline inflation (HICP) in the Eurozone, according to the latest ECB minutes, the governing council affirmed that “signs of a convincing upward trend were still lacking” when talking about underlying inflation (HICP excluding food and energy). (Continue...)

Returns. If 2016 has been a risk-on year (except for the first two months of the year when fears around China, oil price and banks overwhelmed the markets) we expect more volatility in 2017 due to political events and ECB “taper” statements. (Continue...)

Fundamentals. From a fundamental point of view, the current macroeconomic environment is positive for European HY issuers, with stable leverage profile and cash coverage ratios, and default are set to remain low according to the main rating agencies. (Continue...)